Illinois Lawmakers Entertain Bold Bond Sale Plan

Details explained by University of Illinois math professor.

A radical bond sale pension strategy has caught the eye of Illinois lawmakers, drawing both positive and negative criticisms alike.

The plan, first offered by the State Universities Annuitants Association’s (SUAA) proposed the Prairie State sell $107 billion in bonds to help fully fund the state’s pension system, which Reuters reports was just under 40% funded in fiscal 2017, totaling $129 billion.

At the Illinois House Personnel and Pensions Committee’s Tuesday hearing, Runhuan Feng, an associate math professor for the University of Illinois, offered a more detailed explanation, where selling taxable 27-year fixed-rate bonds was the key to getting the state’s five pension systems to 90% funded status. According to Reuters, Feng said Illinois pension costs would see a $103 billion reduction by 2045.

If the gamble were to be implemented and pay off, it would do wonders, as the current funding system sees the state facing a fiscal annual pension payout of $8.5 billion in 2019, reaching heights of nearly $20 billion in the year the $103 billion proposal expects to see that number in reductions.

A bill for the bond issuance was filed by SUAA chairman Robert Martwick, who pointed out that it was in its infancy, with bond experts to testify.

The proposal, as with any risky concept, was received with both optimism and skepticism from lawmakers. While some were curious if there were additional reductions the sale could provide without violating state constitutional rights for public pensions, others speculated how the plan would affect the state’s already poor credit ratings and if the borrowing would negate future bond sales for projects.

“Are we going to be tapped out completely?” Democratic State Rep. Scott Drury said, reported by Reuters.